BERLIN--Daimler AG's net profit jumped 49% in the three months to the end of December, in line with analysts' forecasts, and proposed raising its dividend on 2017 earnings, but issued a cautious outlook for 2018 as rising costs for electric vehicles and self-driving cars dent profits at its flagship Mercedes-Benz car division.

Higher spending on new technology--due to regulators tightening rules on auto emissions and car makers fighting for dominance in the electric-vehicles market--is taking a toll on profits at the company's biggest earner, the Mercedes-Benz car division, which accounted for 58% of the company's revenue last year.

Mercedes defended its title as the top premium-car brand, selling 2.4 million sedans, sport-utility vehicles, and luxury compact cars in 2017, an increase of 8%. But the costs of developing new technology and investment in new models--Mercedes will launch more than a dozen new and upgraded models this year--caused the unit's pre-tax profit to fall 5% to EUR2.4 billion

Daimler said 2018 earnings would be in the "magnitude of the previous year" and there would be only slight growth in vehicle sales and revenue.

The company is planning to invest EUR10 billion to develop a new generation of electric vehicles, with plans to launch 10 new electric cars by 2022. Costs will continue to weigh on profits for several years, Daimler said.

As the Mercedes-Benz car division stumbled in the fourth quarter, a pickup in demand in the U.S. and Latin America boosted sales and earnings at Daimler Trucks, which reported a 60% increase in pre-tax earnings to EUR555 million. The company's vans and bus divisions also posted higher earnings.